Trump Administration Axes Government-Backed Savings Program myRA

The U.S. Treasury Department on Friday announced it’s ending the myRA program, a government savings program meant to encourage non-traditional workers to save for retirement, not even two years after the accounts became available nationwide in November 2015, under the Obama administration. In a press release, the department says it will start to “wind down” the program as part of Trump administration efforts to “promote a more effective government.”

“The myRA program was created to help low to middle income earners start saving for retirement. Unfortunately, there has been very little demand for the program, and the cost to taxpayers cannot be justified by the assets in the program,” said Jovita Carranza, U.S. Treasurer in today’s press release.

Carranza also noted demand for myRA had been extremely low. Currently, according to a treasury spokesperson, there are 20,000 myRA accounts with a median balance of $500 and an additional 10,000 accounts with no balance. That’s up from the 15,000 workers who were enrolled in myRA by the program’s first anniversary in November. Still, that’s not much, given the program was intended to help some 40 million working-age households that don’t own any retirement account assets.

In the press release, the department says myRA has cost American taxpayers about $70 million to maintain. The spokesperson told MagnifyMoney myRA would cost taxpayers an additional $10 million annually if continued.

What Is myRA?

The myRA account was free to open, charged no fees, and didn’t require a minimum deposit to open an account. These features were intended to appeal to workers who may not have access to traditional retirement savings accounts like a 401(k) or 403(b). Workers could contribute up to $5,500 annually, or $6,500 if they were 50 or older, up to $15,000 before having to roll the account into a private-sector Roth IRA.

myRA funds earn interest at the same rate as the Government Securities Investment Fund, which earned 2.04% in 2015 and 1.82% in 2016. That’s a larger return, on average, than savers would get keeping their funds in a typical big bank savings accounts today, which tend to carry fees and offer interest rates as low as 0.01% (though digital banks tend to offer a better rate of return). The single investment option also offered consumers a simpler alternative to choosing from a variety investment options within traditional retirement accounts.

How Does This Affect People With myRA Accounts?

The department has posted a list of FAQs and answers for account holders on myra.gov. For the moment, account holders can continue making deposits, and their balances will continue to accrue interest. The website says the Treasury Department will reach out to all account holders with information about transferring funds from or closing the account and will notify account holders of when it will stop accepting and processing deposits.

In the meantime, account holders should log in and make sure their contact information is accurate, so they can be reached.

The post Trump Administration Axes Government-Backed Savings Program myRA appeared first on MagnifyMoney.

myRA One Year Later: 15,000 Enrolled as Government-Backed Savings Account Struggles to Catch On

myra

It’s been a year since the U.S. Treasury Department launched myRA, a savings account meant to encourage non-traditional workers to save for retirement. So far, just 15,000 workers have enrolled, a Treasury spokesperson told MagnifyMoney.

That’s a drop in the bucket for a program intended to help some 40 million working-age households that don’t own any retirement account assets. The spokesperson, who requested to speak only on background, acknowledged the difficulties of targeting non-savers, a group that isn’t necessarily looking for retirement savings options in the first place. The department’s enrollment strategy focused on partnering with companies directly, whose leaders would in turn encourage their staff to enroll.

As it stands, only people who work at myRA partner companies can participate in the program, and their contributions are taken out directly from their paychecks. The spokesperson declined to say how many companies currently participate. It’s possible the department could make myRA available to all workers in the future.

myra Satori Bailey, director of asset-building programs for the Center for Economic Progress, says leveraging employees’ trust in their employers was a smart move on the department’s part.

“The trust that’s built between an on-the-ground agency is the trust the [Treasury Department] can leverage,” Bailey said. The Center for Economic Progress is currently a myRA partner.

myRA accounts are meant to appeal to workers who may not have access to traditional retirement savings accounts like a 401(k) or IRA. Workers can contribute up to $5,500 annually, or $6,500 if they are 55 or older. Instead of choosing from an at-times confusing array of investment options as one would with most other IRAs, savers’ myRA funds are invested in just one asset: U.S. Treasury bonds, which offer a guaranteed 2% return.

“It seems that a lot of people are not venturing into the private IRA sector because it’s too confusing,” said Bailey. “What the Treasury has done is make this a starter account that is very simple. There will be some yield, and that yield will be generally in your favor.”

A 2% return is many times better than the typical big bank savings accounts today, which charge onerous account fees and offer interest rates as low as .01% (and are constantly bested by digital banks). The myRA account is free to open, doesn’t charge any fees, and doesn’t require a minimum amount of savings to open an account. These features were intended to attract individuals to the program. Clearly, there’s still a long way to go to bring myRA into the mainstream.

The future of myRA

myRA is meant to be something of a starter savings account for workers. Workers can only save a maximum of $15,000. Once they hit that threshold (or they hit the 30-year mark), they have to roll over their account into a traditional IRA.

Two states, Washington and New Jersey, have passed and enacted laws that use a state-based marketplace to encourage citizens to save for retirement; myRA is an available marketplace option in both states. The department says it has received inquiries from other states about myRA’s use in state programs as well.

myRA was launched under the Obama administration. It is yet unclear what myRA’s future will be when Donald Trump takes office.

“I hope that retirement savings for the average American, for all Americans, is such a nonpartisan issue that the department and myRA will maintain its support in the government,” said Bailey.

 

The post myRA One Year Later: 15,000 Enrolled as Government-Backed Savings Account Struggles to Catch On appeared first on MagnifyMoney.